Q3 2010 Earnings Call

November 04, 2010 4:30 pm ET


Sumner Redstone - Founder and Executive Chairman

Leslie Moonves - Chief Executive Officer, President and Director

Adam Townsend - Executive Vice President of Investor Relations

Joseph Ianniello - Chief Financial Officer and Executive Vice President


Michael Meltz - JP Morgan Chase & Co

Michael Morris - Davenport & Company, LLC

Laura Martin - Needham & Company, LLC

Michael Nathanson - Sanford Bernstein

Anthony DiClemente - Barclays Capital

Benjamin Swinburne - Morgan Stanley

Marci Ryvicker - Wells Fargo Securities, LLC

David Miller - Caris & Company

Douglas Mitchelson - Deutsche Bank AG

Brian Shipman - Jefferies & Company, Inc.



Good day, everyone, and welcome to the CBS Corporation's Third Quarter 2010 Earnings Release Teleconference. [Operator Instructions] At this time, I'd like to turn the call over to the Executive Vice President of Investor Relations, Mr. Adam Townsend. Please go ahead, sir.

Adam Townsend

Thank you. Good afternoon, everyone, and welcome to our third quarter 2010 earnings call. Joining me for today's discussion are Sumner Redstone, our Executive Chairman; Leslie Moonves, President and CEO; and Joe Ianniello, Executive Vice President and CFO. Sumner will have opening remarks, and we'll turn the call over to Les and Joe, who will discuss the strategic and financial results. We will then open the call up to questions.

Please note that during today's conference call, financial results and comparisons, with the exception of revenue, will be discussed on an adjusted basis unless otherwise specified. Reconciliations for non-GAAP financial information related to this call can be found in our earnings release or on our website. In addition, statements in this conference call relating to matters which are not historical facts are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ. Risks and uncertainties are disclosed in CBS Corporation's news releases and securities filings.

A webcast of this call and the earnings release related to today's presentation can be found on the Investor section of our website at With that, it's now my pleasure to turn the call over to Sumner.

Sumner Redstone

Thank you, Adam. Good afternoon, everyone. I really thank you for being with us today. Another quarter, another tremendous showing by CBS, all driven by our industry-leading content. In every area where we compete, CBS is thriving. From the number one network to our production and syndication businesses to our critically acclaimed original programming on cable to our best-selling printed books to our diverse websites, the strength of our content is driving our results.

I know I don't need to tell you that I believe that content is king. And CBS content is at the top of its game. We have a powerful distribution platform, the right major-market local assets to get our leading content to every audience, all the places on this earth that matter most. Yes, CBS is firing on all cylinders, and it will continue to do so, not only today, not only tomorrow, but well into the future. And of course, I have great confidence in the marvelous management team that is making this all happen. Beginning, of course, with my very close friend, CBS' President and CEO, Leslie Moonves.

So I'll turn this over to him now. Les, the ball is in your court.

Leslie Moonves

Thank you, Sumner, and good afternoon, everybody. Thank you very much for joining us. As you see from the results we're reporting today, we had another terrific quarter, and our momentum continues to build. Each quarter in 2010 has been better than the one before. Advertising revenues are growing. Profits are higher, and margins are expanding. A great deal of our success comes from how well our content has performed and how well we are monetizing that performance.

The things that we told you would happen over the last several quarters are, in fact, happening. We are benefiting greatly from a return of advertising to historical levels. We are diversifying and derisking our business model by growing our secondary revenue streams. Our major-market local assets are experiencing excellent growth, and once again, most importantly, our content is thriving across the company, also across the country, on a variety of platforms.

At the same time, we're managing our businesses more efficiently, holding down costs and strengthening our financial position as the markets improve. We have taken a number of steps to greatly improve our balance sheet by paying down debt. All of this is coming through in our results, with double-digit growth in profits in EPS and even better growth in free cash flow. These healthy levels of free cash have enabled us to announce today a $1.5 billion share repurchase program beginning January 1. Returning value to shareholders through dividends and share buybacks has been one of our highest priorities all along, and we are pleased to deliver on that objective.

All of these factors that I just mentioned have brought about a structural change that will cause our strong performance to continue into 2011 and beyond. In addition, the two new long-term deals we added with Comcast and the NCAA will only help us that much more. So between the performance of our content, the improving operating environment and our very strong balance sheet, you can forgive me for being even a little bit more bullish than usual today. It's a real good time to be a shareholder of CBS.

I'm going to give some additional comments, then I'll turn it over to our, CFO, Joe Ianniello, and then as always, we'll take your questions. I'll begin with our very strong third quarter financial results. EPS for the quarter of $0.35 was up 40% versus last year's third quarter. OIBDA of $667 million was up 17% as profitability continues to improve significantly, and OIBDA margins are expanding as well. We are now approaching pre-recession levels. This is a trend that should continue into next year as our new and better deals kick in. We grow our secondary revenue streams, and we make sure that the costs we cut a couple of years ago will never return.

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